Question

If the consumer price index increases from 125 to 130 in one year, the rate of inflation is 4%.

a) True
b) False

Answer 1

The inflation rate is calculated by taking the percentage change in the consumer price index (CPI). In this case, the CPI increases from 125 to 130, which is a change of 5. The inflation rate is 4%.

Step-by-step explanation:

The inflation rate is calculated by taking the percentage change in the consumer price index (CPI). In this case, the CPI increases from 125 to 130, which is a change of 5. To calculate the inflation rate, you divide this change by the original value of the CPI and multiply by 100.In this case, the inflation rate is (5/125) x 100 = 4%. So, the statement is true.